Subjective Short Answer
1. In order to assess the level of prosperity in a nation in a given year, should we examine the level of that nation’s real
GDP per person, or should we examine the growth rate of that nation’s real GDP per person?
2. How would an economist typically assess the extent of economic progress in a nation?
3. The level of real GDP is a good measure of economic prosperity, and the growth of real GDP is a good measure of
__________.
4. In the United States over the past century, real GDP per person has grown by about __________ percent per year.
5. Consider the nations of India, Indonesia, and Japan. Over the past century, which of these three nations has
experienced, by far, more rapid economic growth than the other two nations?
6. Consider the nations of Brazil, Mexico, and Pakistan. Over the past century, which of these three nations has
experienced, by far, slower economic growth than the other two nations?
7. Consider the nations of China, Japan, and the United States. Over the past century, which of these nations has
progressed, in an economic sense, more rapidly than the other two nations?
8. Consider the nations of Canada, the United Kingdom, and the United States. Since 1870, which of these nations has
progressed, in an economic sense, more slowly than the other two nations?
9. What word do we use to refer to the amount of goods and services produced for each hour of a worker’s time?
10. John and Miguel are fishermen. When they go fishing, John consistently catches 2 or 3 fish per hour, while Miguel
consistently catches 5 or 6 fish per hour. Miguel’s __________ exceeds that of John.
11. Susan and Calvin paint houses. Susan consistently paints about 400 square feet of a house’s exterior per hour, while
Calvin consistently paints about 300 square feet per hour. Susan’s __________ exceeds that of Calvin.
12. List the four determinants of an economy’s productivity.
13. Which one of the factors of production originates as an output from the production process, and is subsequently used
as an input into the production process?
14. “When workers acquire tools, they become more productive.” This statement reflects the general fact that __________
is a determinant of productivity.
15. Why do we refer to physical capital as a produced factor of production?
16. Is physical capital a produced factor of production? Is human capital a produced factor of production?
17. Does a country have to be blessed with large quantities of natural resources in order to enjoy a high standard of living?
Briefly explain.
18. Because of its vast oil reserves, Saudi Arabia is a rich country. Saudi Arabia exemplifies the general fact that
differences in __________ are responsible for some of the differences in standards of living around the world.
19. Is coal a produced factor of production?
20. What term do we use to refer to the understanding of the best ways to produce goods and services?
21. Explain the distinction between technological knowledge and human capital.
22. What do we mean when we say that some technological knowledge is not proprietary?
23. “Market prices give no reason to believe that natural resources are a limit to economic growth.” Explain this
statement.
24. If a production function has the property called __________, then doubling all inputs causes the amount of output to
double as well.
25. In the production function , Y represents the quantity of output; L represents the quantity of labor; K
represents the quantity of physical capital; and H represents the quantity of human capital. What does N represent?
26. In the production function , Y represents the quantity of output; L represents the quantity of labor; K
represents the quantity of physical capital; and N represents the quantity of natural resources. What does H represent?
27. Consider the production function . Suppose and . Does the
production function have the property of constant returns to scale? Why or why not?
28. Consider the production function . Suppose and . Does the
production function have the property of constant returns to scale? Why or why not?
29. In what sense is capital accumulation costly to a society?
30. Because of __________, an increase in the saving rate leads to higher growth of income and productivity only for a
while.
31. What are the long-run effects on productivity and income of an increase in the saving rate?
32. The people of Country X save 10 percent of their income, and the people of Country Y save 25 percent of their
income. If these respective saving rates persist forever, will one country or the other enjoy a higher rate of income growth
forever? Explain.
33. How does the phenomenon of diminishing returns to capital explain the catch-up effect?
34. In recent decades, economic growth has been much more rapid in South Korea than in the United States. What is the
likely explanation for this fact?
Figure 25-1
35. Refer to Figure 21-1. Does the figure represent the idea that the amount of capital per worker influences the amount
of output per worker, or does the figure represent the idea that the amount of output per worker influences the amount of
capital per worker?
36. Refer to Figure 21-1. In order for the figure to make sense, do we have to assume that capital is the only determinant
of output? Briefly explain.
37. Refer to Figure 21-1. “When the amount of capital per worker increases by one unit, a poor country experiences a
greater benefit than does a rich country.” Does the figure illustrate this notion? Briefly explain.
38. Refer to Figure 21-1. In what way is the figure relevant to the catch-up effect?
39. What is the distinction between foreign direct investment and foreign portfolio investment?
40. What is the relationship between education and human capital?
41. Brazil gives cash payments to its poor citizens on the condition that those citizens’ children stay in school. In terms of
the determinants of productivity, how might this public policy contribute to higher productivity in Brazil?
42. Studies have found that there is a relationship between height and productivity. Briefly explain.
43. Research suggests that taller workers tend to earn more income than shorter workers. What does this suggest about the
relationship between workers’ height and their productivity?
44. An important prerequisite for the price system to work is an economy-wide respect for _______ rights.
45. What particularly important role do courts play in a market economy?
46. What are inward-oriented policies? Do most economists recommend these types of policies to poor countries?
47. When a country imposes tariffs, intending to protect domestic firms from foreign competition, it is pursuing _______–
oriented policies.
48. When a country eliminates tariffs and other trade restrictions, intending to promote economic growth, it is pursuing
_______–oriented policies.
49. In what sense is it likely that geography has an effect on a country’s rate of economic growth?
50. Which well-known economist from the past asserted that “the power of population is infinitely greater than the power
in the earth to produce subsistence for man?”
The economist was Thomas Robert Malthus.
51. Use the data on U.S. real GDP below to compute real GDP per person for each year. Then use these numbers to
compute the percentage increase in real GDP per person from 1993 to 2012.
Year
Real GDP (2009 prices)
Population
1993
$9,510,800 million
257.8 million
2012
$15,470,700 million
313.85 million
36,892)/36,892 = about 33.6%.
52. Why is productivity related to the standard of living? In your answer be sure to explain what productivity and the
standard of living mean. Make a list of things that determine labor productivity.
53. What is a production function? Write an equation for a typical production function, and explain what each of the terms
represents.
54. What is the difference between human capital and technology?
55. The catch-up effect says that countries with low income can grow faster than countries with higher income. However,
in statistical studies that include many diverse countries we do not observe the catch-up-effect unless we control for other
variables that affect productivity. Considering the determinants of productivity, list and explain some things that would
tend to prohibit or limit a poor country’s ability to catch up with the rich ones.
56. Some data that at first might seem puzzling: The share of GDP devoted to investment was similar for the United States
and South Korea from 1960-1991. However, during these same years South Korea had a 6 percent growth rate of average
annual income per person, while the United States had only a 2 percent growth rate. If the saving rates were the same,
why were the growth rates so different?
57. In addition to investment in physical and human capital, what other public policies might a country adopt to increase
productivity?
58. Why does a nation’s standard of living depend on property rights?
59. How do outward-oriented policies affect a nation’s productivity?
60. At first patents might seem like a deterrent to growth because in effect they restrict the use of new technology. Yet
many economists believe that patents generate growth. Explain why.
61. Some economists argue that it is possible to raise the standard of living by reducing population growth. As an
economist interested in incentives rather than coercion, what kind of policy would you recommend to slow population
growth?
62. Compare and contrast the population theories of Malthus and Kremer.